2010 FSI Survey on the Implementation of the New Capital Adequacy Framework

FSI PapersAugust 2010

Executive summary

Over the past years, the Financial Stability Institute (FSI) has conducted surveys on subjects of supervisory interest and shared the results with the supervisory community. The FSI carried out a survey on Basel II implementation in 2004, followed by updates in 2006, 2008 and 2010.

The 2010 survey was sent to 173 jurisdictions, including members of the Basel Committee on Banking Supervision (BCBS). Responses were received from 133 jurisdictions, representing an overall response rate of 77%.

The 2010 survey results indicate that 112 countries have implemented or are currently planning to implement Basel II, as compared to 106 countries in the 2008 survey.1 The results of the 2010 survey reinforce the conclusion of the earlier FSI surveys that Basel II will be implemented widely around the world. The Standardised Approach is the most commonly used of the three credit risk methodologies - 96 respondents adopting Basel II plan to implement the Standardised Approach. The Foundation Internal Ratings Based Approach (Foundation IRB) will be implemented by 65 jurisdictions (as compared to 72 in the 2008 survey) and 61 respondents (as compared to 69 in 2008) intend to offer the Advanced Internal Ratings Based Approach (Advanced IRB).

The 2010 survey indicates that the Basic Indicator Approach for operational risk is expected to be the most widely employed - by 90 respondents adopting Basel II (the same number as reported in the 2008 survey), followed by the Standardised Approach - 84 respondents (80 as per 2008 survey) and by Advanced Measurement Approaches - 59 respondents (62 as per 2008 survey).

The 2010 survey indicates that a large number of jurisdictions will be offering the advanced approaches for credit risk and operational risk under Pillar 1. As many as 61 jurisdictions will be offering Advanced IRB for credit risk and 59 jurisdictions will be offering AMA for operational risk by the year 2015.

The 2010 survey results indicate that 90 jurisdictions will be implementing Pillar 2 and 93 will be implementing Pillar 3 by 2015, as compared to 91 jurisdictions each implementing Pillars 2 and 3, respectively, in the 2008 survey. In the medium-term (up to 2012), however, the 2010 survey indicates that fewer countries will be implementing Pillars 2 and 3 compared with the 2008 survey. This could be because more preparation may have been required for implementation, possibly also in the context of enhancements to the Basel II framework, than was originally contemplated in 2008.

The 2010 survey also asked jurisdictions if the financial crisis and/or subsequent regulatory response had an impact on their Basel II implementation plans. Out of the 133 responses received, 32 jurisdictions (three from Africa, four from Asia, five from Caribbean, 10 from Europe, six from Latin America and four from Middle East) answered in the affirmative. Twenty-three jurisdictions mentioned that the crisis had led to a delayed timetable for Basel II implementation, whereas five jurisdictions reported that the crisis had led to an accelerated timetable for implementation. One jurisdiction mentioned that, whereas some aspects of Basel II implementation were kept on an accelerated timetable, some other aspects were delayed due to the crisis. Three jurisdictions reported that although the crisis had affected Basel II implementation the overall timetable for Basel II implementation remained on track - there was neither a delay nor an acceleration of the timetable.

The 2010 survey also asked jurisdictions about their current focus in terms of supervisory work related to Basel II and other priorities in banking supervision. Several jurisdictions are working to either implement or operationalise Pillar 2 as a part of their Basel II related work. As regards other priorities in banking supervision, several countries indicated that they were working on enhancing the efficiency and effectiveness of on- and off-site supervision.

This paper presents the responses to the survey from global and regional perspectives while observing the confidentiality commitment made in respect to individual country responses. The paper is organised as follows: Section 2 discusses the global results of the survey. Sections 3-8 describe specific plans related to the implementation of each of the Basel II components across each region.

1 Some countries that responded to the 2008 survey did not respond to the 2010 survey and vice versa. The 2008 survey results have been restated to include all jurisdictions that are currently members of the Basel Committee.